Institutional plan sponsors had a strong year of investment gains in 2017, with the median plan returning approximately 15.3 percent in the 12 months ending December 31, 2017, according to Northern Trust Universe data released today. The Northern Trust Universe tracks the performance of approximately 300 large U.S. institutional investment plans, with a combined asset value of approximately $927.5 billion, which subscribe to performance measurement services as part of Northern Trust’s asset servicing offerings.
“The fourth quarter of 2017 marked the ninth consecutive three-month period of gains for institutional investors in the Universe, with equities providing the foundation for positive results over that period,” said Mark Bovier, regional head of Investment Risk and Analytical Services at Northern Trust. “All plan sponsor segments had median returns above 3 percent in the fourth quarter, but each segment took a different path to achieve those gains.”
Public Funds gained 3.8 percent at the median in the fourth quarter, slightly ahead of Corporate ERISA plans, at 3.7 percent, and Foundations & Endowments, at 3.4 percent. Equities led all asset class returns in the fourth-quarter of 2017, with the median U.S. equity program in the Northern Trust Universe up 6.1 percent, followed by non-U.S. equities with 4.9 percent in the period. Fixed income was up a modest 0.7 percent in the quarter.
Public Fund returns were boosted by a relatively larger allocation to equities – more than half of all assets in the median allocation for the segment. Corporate ERISA plans had the largest allocation to fixed income, but they invest heavily in longer-duration bonds and sectors that performed better than core fixed income. Foundation & Endowment returns were weighed down by relatively weak returns from alternatives, where they have the largest allocation among the three segments.
“Institutional plan sponsors continued to benefit from a historic bull market in stocks in 2017,” said Bill Frieske, senior investment performance consultant, Investment Risk and Analytical Services. “Previous highs for institutional returns in the Northern Trust Universe were recorded following the severe stock market downturns of 2008, when the global financial crisis hit, and 2002, when the so-called ‘tech bubble’ burst. In contrast, 2017 marked the continuation of a positive run for U.S. equities dating back to 2015.”
Longer-term returns as of December 31, 2017 are as follows:
1 Yr 3 Yr 5 yr
ERISA 15.7% 7.5% 8.8%
Public Funds 16.2% 7.8% 9.1%
Foundations & Endowments 14.4% 7.0% 8.5%